Compliance essentials for workplace nursery schemes

With the recent HM Revenue & Customs (HMRC) warnings, businesses operating workplace nursery schemes must understand the relevant regulations to avoid considerable tax penalties. 

Understanding workplace nursery schemes 

Workplace nursery schemes are initiatives designed to help working parents with childcare costs.  

These schemes allow employers to provide childcare facilities directly or through third-party providers.  

Employees benefit from tax and National Insurance (NI) exemptions on these costs. 

HMRC’s recent alert 

HMRC has identified misuse of workplace nursery schemes by some businesses.  

Improper use of these schemes to reduce tax payments can result in substantial penalties. You should ensure that your scheme genuinely provides childcare services, rather than disguising payments. 

Key steps for compliance 

To stay compliant with HMRC regulations, businesses should focus on the following areas: 

• Your nursery scheme must genuinely offer childcare services that benefit employees. Any arrangement resembling a disguised payment will attract HMRC scrutiny. 

• Establish clear, legally binding agreements with third-party childcare providers. These agreements should detail the nature of services, costs, and duration.  

• All financial transactions related to the scheme must be transparent and accurately recorded. Inaccurate or misleading reporting can lead to HMRC investigations and penalties. 

• Verify that employees participating in the scheme meet HMRC criteria for tax and NI exemptions. Accurate records of employee eligibility are essential to avoid issues during HMRC investigations. 

Consequences of non-compliance 

Non-compliance with HMRC regulations can lead to severe consequences, including substantial fines, reputational damage, and in extreme cases, legal action against your business. 

How we can assist 

If you have concerns about ensuring your workplace nursery scheme meets HMRC requirements, our team of experienced accountants is here to help.  

We offer expert advice and support to keep your business compliant. 

Contact us today to learn how we can assist you in managing workplace nursery schemes and maintaining HMRC compliance.